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Those that have lost out due to poor advice or service from pension firms, insurance companies and financial advisers will be able to claim significantly more compensation from April 1.

City watchdog the Financial Conduct Authority (FCA) has confirmed it is pressing ahead with its proposal to more than double the amount of compensation that can be claimed by consumers and businesses through the Financial Ombudsman Service (Fos).

From the start of April, the current £150,000 limit will be raised to £350,000 in line with a proposal put forward in October last year.

For complaints made for events prior to April 1 but referred after April 1, the limit has been raised to £160,000.

Robin Beer, of Brewin Dolphin, a wealth manager, said that increasing the compensation limits could help to improve the negative perception of the financial services.

“Importantly, it could encourage people to invest and save adequately for their futures,” he added.

In the future, both of these limits will automatically rise in line with inflation every year.

The FCA's Andrew Bailey said: “Consumers and small businesses struggle with the cost and time needed to take firms to court, so it is essential they can receive fair compensation when things go wrong.”

James Daley of Fairer Finance, a consumer rights group, said that the previous cap had been too low, even though most cases were settled under the threshold.

Analysis by the FCA last year suggested as many as 2,000 complaints per year upheld by the ombudsman service were above the limit. “Consumers need to have confidence that the Ombudsman has sufficient powers to force companies to compensate them and this should now cover 99.5pc of claims,” said Mr Daley.

In addition to the limit change, the FCA announced an extension of the service to include small and medium-sized businesses with fewer than 50 employees, turnover of less than £6.5m and cash of less than £5m. This will bring 210,000 new potential complainants.

Before taking a case to the ombudsman, you must first go through your provider’s internal complaints system. They have to give their final response within eight weeks at the most, depending on whatthe complaint is about.